I will admit that I have developed the occasional habit of smoking cigars (small cigars mostly—cigarillos). This is just a recent occurrence and one my husband says coincides with the evolution of Cima Collina. Many times, there just seems nothing better than to go home, sit on our porch, look at the mountains around our house and smoke a cigar, and maybe drink a little Pinot as well. Not being the kind of person to have many vices (although I’m a winemaker, I tend to actually consume very little wine myself), I wonder if he might be right…..

When talking about Cima Collina, people ask me all of the time about what it is like to be involved in a start-up winery. On any given day I could say exciting, fun, daunting or downright frustrating, as one might say with any new project. A project that involves the production and sale of alcohol, however, is probably even more challenging than most might think and it is mostly challenging when it comes to government regulation. Let me give you a run-down here of the hurdles wineries are required to jump over in the US:

There are a myriad of local regulations these days either restricting wineries or banning them altogether. These are usually county regulations, although cities sometimes participate in this as well. Many of these regulations have come around in the last 10 years or so in response to public sentiment about vineyards or wineries. Much of this sentiment stems from misinformation about the wine industry or a “not in my backyard” attitude, or in this area especially, an incredibly far-reaching fear that a community will be “Nap-ified” (ie, there will be almost nothing else but wineries and vineyards in the area). Some of this sentiment is in response, and justifiably so, in my opinion, to ill-conceived projects in the past that caused erosion or some other environmental catastrophe or destruction (hillside terracing, cutting down forests, etc.). So, for a new winery project just about anywhere on the west coast these days, it takes a lot of effort to discover where, how, and, especially, how much it will cost to just get the local conditional use winery permit.

Also under the local regulations category is, of course, the building codes, fire inspection and water permits.

If one is able to obtain a local permit, then a state license from the alcohol control entity (in California it is Alcohol and Beverage Control, or “ABC”). They must approve the winery space, and the proposed uses of the building. Additionally, the winery must pursue various licenses from ABC for a number of purposes: selling wine off-site, tasting room licensing, some types of events require additional temporary licensing, etc.

In addition to “ABC”, the other state entity to consider is that which manages excise tax and reseller permits. (In California, this is the Board of Equalization, or “BOE”). The winery must apply to the BOE to receive a reseller permit. This also allows the winery to pay sales taxes. And, of course, to remain in good standing with the BOE, one must file sales tax returns on time every quarter.

Another permit one has to get if buying grapes from vineyards not owned by the winery is an Agricultural Processor’s permit as well as an Agricultural Agent’s permit.

Before a winery can legally produce wine intended for sale, it has to be “bonded”, ie it must get a federal “Basic Permit” to produce alcoholic beverages under a bond. This is a very complicated process that involves a lot of paperwork, time and patience, on the part of the winery as well as the federal agent handling the case. This permit is received from the “Alcohol and Tobacco Tax and Trade Bureau” (formerly known as the “BATF”, but currently known as “TTB”), under the umbrella of the Department of Treasury. There are many requirements that must be met, and a number of restrictions understood, for a winery to be bonded and also to continue to be bonded. Some requirements, for example, are making sure that bonded wine remains in and properly accounted for in the “bonded area”; filing monthly forms (formerly known as 702’s, now know as 5120.17’s) describing the activities that took place in the winery, monthly inventory depletions in casegoods, amount of grapes brought in during crush, monthly wine inventory, etc.; filing excise tax forms in a timely basis, and of course paying the excise taxes due.

Once a winery is ready to sell it’s product and wants to sell directly to consumers in other states, then it is time to pursue interstate licensing. If a winery is in California, then it does not need a license to sell to consumers in California (thank goodness). But for every other state, there are highly varied licensing requirements (the application can be one page or ten pages; there can be a variety of applications for one state; some states require excise tax returns be filed every month regardless of whether wine was sold or not; some states require hundreds of dollars per label for label registration), different costs involved and various restrictions on how much can be shipped to an individual at any given time. The list doesn’t stop there, but you might get the idea of the amount of bureaucracy and paperwork involved when most states require licensing of some sort with different requirements. Those, of course are the states we can ship to; some we can’t. If you are interested in this, feel free to check out the Wine Insitute for more information.

So, there you have it for government regulations and wineries. I will go home and have a cigar, and then we can discuss the other challenges of a start-up winery: marketing, sales, winemaking, politics, wastewater, and maybe in the end making (a little?) money…..

This entry was posted on Wednesday, March 22nd, 2006 at 10:59 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.